Biodiesel feedstocks face Malaysian lockdown squeeze

Malaysian used cooking oil (UCO) and palm oil mill effluent (POME) collections face potential curbs under new Covid-19 lockdown restrictions coming into effect today.

A movement control order (MCO) will be in place until at least 26 January in the states of Penang, Selangor, Malacca, Johor and Sabah, plus the federal territories of Kuala Lumpur, Putrajaya and Labuan. The states of Pahang, Perak, Negri Sembilan, Kedah, Terengganu and Kelantan are placed under a less stringent conditional MCO, while Perlis and Sarawak are under recovery MCO that only restricts interstate travel.

But the measures could be extended should they fail to slow the spread of Covid-19, with the number of daily cases having regularly topped 2,000 so far this year and hit a record 3,000 on 7 January.

Malaysia implemented a MCO during the first wave of the pandemic in March last year, which halved waste-biodiesel feedstock collections in the country.

Net UCO exports dropped to 52,000t during January-October last year compared with 116,000t for the same period in 2019. But market participants felt that the effects will not be as severe this time with measures being more relaxed and business friendly.

Restrictions include no travelling between states or districts, roadblocks to limit travel to a 10km radius from home and only takeaways and food deliveries allowed from restaurants.

Manufacturing, construction, service, trade and distribution, and the plantation and commodity sectors can continue running, meaning palm oil mills will still be producing.

There is some confusion if UCO and POME collections are considered essential and exempt from the MCO. Most suppliers said they will still be allowed, although there may be delays or less physical product to pick up.

UCO suppliers are concerned over the reduction in footfall traffic for eateries limiting availability, although some argued that people had gotten more accustomed to ordering in that could offset some of the losses.

But crude palm oil (CPO) stocks are already at historic lows as Covid-19 restrictions have led to a lack of foreign workers and floods in the east and south of the country subdue output.

Resultant tighter POME supplies could see bullish collectors, should they be unable or unwilling to make collections during the MCO, content to leaving produce in mill ponds. Low CPO production and stocks already pushed POME prices up to $800/t fob Malaysia last week, the highest level since Argus began assessing values in February 2020.

But the temptation to leave the feedstock in the ponds unprocessed for an extended amount of time is tempered as it could lower the oil extraction rate and quality of the final product, especially during heavy rainfall.

By Amandeep Parmar